NEW YORK -- U.S. stocks rallied, with the Dow Jones industrial average posting its biggest gain in more than a month, on investor optimism that third-quarter corporate earnings will show the fastest growth in four years.
Financial and Internet issues once again led the gainers.
PepsiCo Inc. shares had their best performance since March after the company reported earnings that exceeded estimates. That spurred an 8 percent gain in Coca-Cola Co., its largest gain of 1999.
"We have what promises to be a good earnings season in front of us at the moment," said Jim Griffin, chief investment strategist for Aeltus Investment Management, which oversees about $60 billion in Hartford, Conn.
The Dow industrials climbed 187.75 to 10,588.34. The Dow is now up 15.3 percent for the year, having rebounded nearly 375 points, or 3.7 percent, since last Wednesday, when it fell to its lowest point since early April.
Broader stock indicators also rose yesterday, although advancing stocks only narrowly beat decliners. The Standard & Poor's 500 index rose 24.05 to 1,325.40, with Coke contributing most to the climb, and the Nasdaq composite index was up 57.54 at 2,857.21.
The Russell 2,000 index, a benchmark of small-cap stocks, climbed 3.75 to 429.76; the Wilshire 5,000 index soared 213.50 to 12,092.60, its first close over 12,000 in more than two weeks; the American Stock Exchange composite index advanced 2.78 to 787.43; the New York Stock Exchange composite index jumped 10.60 to 609.90; and the S&P; 400 midcap index added 5.04 to 389.86.
The Sun-Bloomberg Maryland index of the top 100 Maryland stocks gained 2.70 to 189.18.
Advancing issues outnumbered decliners by a 7-to-5 margin on the NYSE, where 895.2 million shares were traded.
Analysts said investors were focused on third-quarter earnings reports which have begun to trickle in, and expected many of them to be strong.
The optimism about earnings comes after weeks of worry about what the Federal Reserve would do with interest rates. The Fed decided Tuesday to leave interest rates alone for now, but leaned toward a rate boost in the coming months.
Although the Fed's announcement initially led to heavy selling Tuesday, investors were more relaxed yesterday.
"The market spent six weeks wringing its hands about interest rates, and, though it didn't get exactly what it wanted, it's now behind us," said Alfred Goldman, director of market analysis for A. G. Edwards & Sons Inc. in St. Louis.
For companies that reported earnings yesterday, the market followed its recent pattern of rewarding companies that beat analysts' expectations and punishing those that meet but do not exceed forecasts.
Pepsi, the No. 2 soft-drink maker, climbed $1.75, or 5.6 percent, to $33.1875 after it posted third-quarter earnings of 34 cents a share on higher sales of Frito-Lay snacks and Tropicana juices. Coke, the top soft-drink maker, gained $4 to $51.9375.
Investors punished Alcoa Inc. after the No. 1 aluminum maker reported a drop in shipments even though third-quarter earnings of 69 cents a share met analysts' estimates. Alcoa fell $2.125 to $62.
Yahoo! Inc. rose $2.4375 to $175.75 in regular trading and another $6.875 in after-market trading on the Nasdaq stock market. The world's largest Internet directory reported third-quarter profit of 14 cents a share after exchanges closed, beating the 9-cent average forecast.
Online auctioneer eBay Inc., up $10.50 to $151.6875, and Priceline.com, up $8.50 to $72.75, led the Nasdaq's rise.
America Online Inc. soared $6.50 to $120, leading Internet shares higher. AOL said it will provide its instant-messenger feature to users of Lycos Inc.'s Web site, allowing Lycos customers to exchange instantaneous private online messages and to communicate with AOL subscribers.
Semiconductor maker Advanced Micro Devices Inc. rose 81.25 cents to $19.4375. After exchanges closed, Intel Corp.'s biggest rival in the microprocessor market reported a smaller-than-expected loss of 72 cents a share. Analysts had expected a 97 cents a share loss.
American Express Co. rose $5.8125 to $146.50, and J. P. Morgan & Co. climbed $3.50 to $118.75.
MCI WorldCom Inc. jumped $2.9375 to $70.875. The long-distance company fell 5.2 percent Tuesday after agreeing to buy rival Sprint Corp. for $129 billion in the world's biggest corporate takeover.
AT&T; Corp. rose $1.625 to $46.625. The largest U.S. wireless telephone company and Dobson Communications Corp. agreed to buy closely held rural cellular-phone company American Cellular Corp. for $2.32 billion through a joint venture, allowing AT&T; to cut costs as the use of its wireless network increases.
Merck & Co. rose $2 to $72.125 after its pharmacy-benefit-manager subsidiary, Merck-Medco Managed Care LLC, and CVS Corp. said they have signed an agreement to collaborate on products sold over the Internet, expanding each U.S. company's health offerings. CVS advanced $6.75 to $43.8125.
Safeway Inc. gained $1.9375 to $35.9375 after the third-largest U.S. supermarket company said it will buy back up to $1 billion in stock. Safeway shares have fallen 44 percent this year.
American Home Products Corp. gained $1.875 to $45.125 after the drugmaker, which also produces farm chemicals, said it plans to cut 700 jobs and close some plants as its struggling agricultural business loses sales to rival Monsanto Co. American Home said the cuts will result in $219.9 million in charges against third-quarter earnings.
Pimco Advisors Holdings LP rose $2.1875 to $34.9375 after Allianz AG, Europe's second-largest insurer, said it is in talks to buy the biggest U.S. bond-fund manager for about $4.4 billion.
Sunrise Assisted Living Inc. plunged $12.875, or 52 percent, to $11.6875 after the operator of communities for the elderly warned it would not meet analysts' estimates for third- and fourth-quarter profit.
Genzyme Corp., one of the world's biggest biotechnology companies, jumped $7.3125 to $40.25 as investors dismissed speculation that its top-selling drug could lose market share to an experimental drug that has yet to be approved.
On Tuesday, Genzyme fell 23 percent after rival Oxford GlycoSciences presented data on a possible rival to Genzyme's major product, the drug Cerezyme, which treats Gaucher disease, a rare inherited disorder.
Pub Date: 10/07/99